The Myth of Common Stocks

Discussion in 'Stocks' started by andrasnm, Jan 18, 2006.

  1. I have read somewhere (I think it was Forbes) that most rich people in the USA own very little common stocks. Some common shareholders are insiders or discounted shares were gifted as some high tech companies still do in silicon Valley.

    According to this article, most preferred (no pun intended) to own preferred shares and bonds.
    Clear to see why...If you have a few million it is easy to get 7-10 percent relatively safely and diversely and never touch your principle in theory.
    You get $140,000 on 2 million per year and never risk a dime of the original money...would you daytrade with that 2 mill or just park it somewhere and enjoy life?

    Even the middle class rich invest more money in their education, home and other real investments than common shares investments. There is a very good reason for that. The future for most common stocks in the USA are very uncertain at best. Short term thinking from the Wall Street "talking heads" and unequal compensation from boardrooms towards mediocre executives can also explain why the "smart money" is leery of investing in something where they are the last to be paid if ever in case of a chapter 11.
    Maybe this is the reason Buffett is speculating in Silver and Currencies as badly he is doing maybe it is just a learning curve for the man...
    So what do the rich invest in besides RE and bonds?
    Private business ownership has certain advantages of common share investing. It is hard to see how you can lose money in a few McDonalds franchises or a chain of tit bars in Dallas....
  2. Common people shouldn't get involved with stocks, a lot of talent, time and patience is required to be a good stock picker, something people don't have.

    On my opinion ETFs represent the best alternative for investors due to the diversifications they offer and the small commissions.
  3. qazmax


    You get rich though concentration and you stay rich though diversification.

  4. Good statement and a lot of truth to it. The problem is that a lot of people concentrate in bad investments like Mr. Cuban's blog has stated.

    popesidious is right, most people have what it takes to be a good stock picker, but the don't do what it takes. It's not easy and it does take A LOT of effort and sacrifice.

    Most schmo's just need to keep their nose to the grindstone, diversify and hope to live long enough to reap the rewards.

    Hopefully most of us here have done our homework, have honed our skills so we can skip the "Joe Schmo" route to wealth.